In this context, 2-step sample selection estimators have become a well-established approach to model bilateral trade in the presence of zero flows. These let us remove the effect of the extensive firm margin so as to correctly estimate the intensive effect, in contrast with other approaches which calculate coefficients that combine both the extensive and intensive margins [1]}. [2]} also show that traditional estimates are biased and that most of the bias is due not to selection but rather to the omission of the extensive margin. Moreover [3]} conclude that censored or truncated regression, and replacement of zero flows with arbitrary numbers are not preferable as these approaches may yield misleading results and as they rely on ad-hoc assumptions and artificial censoring. Sample selection models, on the other hand, allows zero flows and the size of potential trade to be explained jointly and proved to be the best choice, both from an economic and econometric point of view.
